Defense Contractors Brace for the Big Squeeze

Bloomberg Businessweek reports:

In recent rounds on Capitol Hill, Defense Secretary Robert M. Gates has delivered a tough message to contractors: The age of ultra-generous Pentagon budgets is about to end. The latest reminder of the Pentagon's new austerity came from Admiral Michael G. Mullen, chairman of the Joint Chiefs of Staff, who warned on Feb. 17 that debt is the "greatest threat to our national security."

After a decade of record defense spending increases—powered by military operations in Iraq and Afghanistan—contractors now must contend with budget-cutting zeal from Gates, liberal Democrats, and conservative Republicans, all looking for ways to trim deficits. The companies "should be concerned," says Michael H. Herson, president of American Defense International, a lobbying and consulting firm. "They need to adapt to the changes that are coming."